Premium pace trips Allstate stock

Price growth has slowed, chief says

Shares of Allstate Corp. dropped as much as 9 percent Thursday, the most in 16 months, after the Northbrook-based insurance company said the pace of premium increases has slowed.

Chief Executive Edward Liddy said price growth slowed last year after higher rates on home and auto policies helped fourth-quarter net income increase 69 percent, to $447 million.

"Premium growth is going to be less than expected," said Michael Paisan, an analyst at Legg Mason Wood Walker, which reduced its rating on the company's shares to "hold" from "buy."

Allstate faces mounting consumer pressure on regulators to limit insurance companies' rate demands after two years of increases, analysts said. Allstate will have to sell more policies and lower costs to increase its profit this year, they said.

"Rate increases will continue at a reduced rate, probably in the mid-single-digit range," Liddy said.

State regulators approved an average 9.9 percent increase in Allstate-branded homeowner policies during the fourth quarter, the company said in Wednesday's earnings release. Allstate's standard auto premiums rose 4.4 percent.

The number of Allstate's new policies declined in Texas, Florida, California and New York as the company sought to target only the most profitable customers.

"You have to make it in those four states if you want to be a national player," said Patrick Meegan, an analyst at Hotchkis and Wiley Capital Management.

Allstate shares also fell on concern that about $100 million of fourth-quarter profit resulted from a one-time tax benefit.

"The market is overreacting," said Alan Villalon, an analyst at Federated Investment Management.

Allstate shares closed at $32.02, down $2.37, or 6.9 percent, on the New York Stock Exchange. During the day it fell as low as $31.30.